USwitch blasts banking code failures

USwitch, the price comparison site, has challenged the banking code standards board to make it compulsory for income and affordability checks to be carried out before issuing unsecured lending products. The site’s annual Credit Card Affordability survey has shown that credit card providers are still ‘woefully inadequate’ when it comes to carrying out these checks. This is in spite of changes to the banking code six months ago designed to establish a customer’s ability to repay borrowing.

According to USwitch, in the last 12 months, 89 per cent of credit cards were issued without the need for applicants to prove their income, while 96 per cent of applicants did not need to prove their outgoings. This means that new credit card customers were able to secure £3.08 billion of credit without providing proof of income.

Banks have previously stated that most customers apply to their existing bank for credit and that there is therefore no need for additional checks. However, USwitch’s study has found that 74 per cent of successful credit card applicants did not apply through their bank, and most of these credit cards were issued without any need to prove that the customer could afford to repay the additional credit.

USwitch has predicted that the inadequacy of financial checks and procedures will result in increased levels of bad debt write offs. Director of Personal Finance Nick White says: ‘We are not seeking to sensationalise an issue that doesn’t exist or blame the banks or regulatory bodies for consumer debt. We are just raising an issue that needs to be resolved to ensure that adequate remedies are put in place to stop the UK debt epidemic from claiming any further victims. The solution for this is an urgent amendment to the Banking Code stipulating that income and affordability checks become compulsory on all unsecured lending products.

‘The level of credit offered to consumers still remains one of the most prominent issues explored in this study. It’s nothing short of irresponsible for providers to grant applicants living on less than the average wage credit limits which they would never be able to afford and in many cases tie them to a lifetime of debt.’